The Morning Brief: Discovery, PointState Take Large Stakes in Peabody Energy

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Robert Citrone’s Discovery Capital Management said in a regulatory filing it owns 29.6 percent of Peabody Energy’s shares.

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At least two high-profile hedge funds disclosed significant
stakes in Peabody Energy, the embattled coal company that
emerged from bankruptcy on April 3.

Robert Citrone’s Discovery Capital Management
said in a regulatory filing it owns 29.6 percent of the shares.
It acquired the stake after the company emerged from bankruptcy
under a reorganization plan with debt holders. The company cut
its debt by more than $5 billion. The stock started trading on
Tuesday, April 4. In a 13D filing, Discovery said it acquired
the shares for investment purposes and that it has no plans or
proposals for the company. Separately, PointState Capital
disclosed it owned more than 8.3 million shares, or 9.1 percent
of Peabody Energy as of April 3. The filing was made in a 13G,
meaning the investment is passive.

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Shares of Valeant Pharmaceuticals closed Thursday at its
lowest price in more than eight years. The stock fell 1.25
percent to $9.48 and is now down about 35 percent for the year
after plummeting 86 percent last year. There was no apparent
news. The stock’s free-fall is a huge blow to
hedge funds like ValueAct Capital, which recently added to its
stake as the stock continued to tumble. At the same time,
Pershing Square Capital Management finally threw in the towel
on its ill-fated bet on the crumbling drug company. It will be
very interesting to learn who held on to their position and who
bottom-fished when the first quarter 13F filings are made
public on or around May 15. Fun fact: Just one year ago the
stock closed at what seemed like the very depressed, temporary
price of $33.10. Wow!

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Point72 Asset Management disclosed that as of April 11 it
owned more than 20.5 million shares of WPX Energy, or 5.2
percent of the petroleum and natural gas exploration company.
The investment is passive, according to the filing made by
Steve Cohen’s family office. We don’t
know Point72’s position in the stock in the first
quarter, but at year-end it owned nearly 5.6 million
shares.

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The average hedge fund in Preqin’s database
rose 0.68 percent in March, boosting the gain for the first
quarter to 3.18 percent. This is the best first quarter of a
year posted by hedge funds since 2013. Hedge funds that had
more than $1 billion under management performed better than
their small peers, gaining 3.98 percent for the year. By
contrast, so-called emerging funds were up 3.27 percent, small
funds 2.55 percent and medium-sized funds rose 2.91
percent.

Interestingly, funds of hedge funds, which actually lost
0.35 percent last year, gained 2.2 percent for the first
quarter.